Business System
Systems and processes are the essential building blocks of our companies. Every facet of your business—on the shop floor, in the warehouse or in the office—is part of a system that can be managed or improved by applying correct principles. A business system is designed to connect all of an organization’s intricate parts and interrelated steps to work together for the achievement of the business strategy. Creating effective business systems often unifies the problem solving and decision making of the organization. Many common tools and methodologies are universally taught and expected to be utilized by all levels. Several key management structures, such as a full-time Performance Excellence office or systematic maturity assessments, are made a permanent part of the infrastructure. The business system also encompasses how we lead our people and connect them to the operational strategy. Economic System Businesses operate in the economic system which is a system of production, resource allocation and distribution of goods and services within a society and it also represents an attempt to solve three fundamental and interdependent problems: * What goods and services shall be produced and in what quantities? * How shall goods and services be produced? That is, by whom and with what resources and technologies? * For whom shall goods and services be produced? That is, who is to enjoy the benefits of the goods and services and how is the total product to be distributed among individuals and groups in the society? General Concepts The study of economic systems includes how these various agencies and institutions are linked to one another, how information flows between them and the social relations within the system (including property rights and the structure of management). The analysis of economic systems traditionally focused on the dichotomies and comparisons between market economies and planned economies and on the distinctions between capitalism and socialism. Today the dominant form of economic organization at the world level is based on market-oriented mixed economies. Inputs and Outputs of a business system Every company has an organization that receives an input (e. g. resources, objectives) and gives out an output (e. g. goods, services). A common adage says that “If you’re not growing, you’re dying.” In field service, this means that unless your business is getting better and/or bigger, your business is suffering. With so many competitors, someone else is improving with the goal of stealing your customers. There is no standing still in life and commerce. One of our favourite models for work is IPO: Input – Process – Output. Inputs are the resources invested in accomplishing a task, and typically include time, money, and effort. Process refers to what is done in order to accomplish a task. The output is, obviously, the accomplishment itself. If you can get the same outcome with less work involved, this would be an improvement. So would improving a process to get more of a certain output. Inputs Materials and Inventory Alternate suppliers and purchasing distribution systems are a must for business continuity plans. Raw materials and finished goods inventory are vital inputs for a wide range of businesses, and an interruption in the flow of these inputs can damage revenue and your company's image during an emergency Labor Labor is also vital to small business survival; identify which employees would be the most valuable to your organization during a disaster response. Prepare alternate working conditions, such as temporary office space or the ability to work from home, so that this key input can continue throughout the normalization process. Financing Financing, as a necessary input, must be considered as well. Sources of financing may dry up during a catastrophic event if your current lenders are nervous about your company's ability to survive. Outputs Products and Services The main output of any business is its suite of products or services. Making sure that your products or services reach customers during a crysis recovery is a core component of a business continuity plan. This may mean identifying third-party manufacturers who can take on some of your demand for a limited time, or identifying alternate distribution channels or partners to keep your products flowing to customers. For service businesses, temporary office space or alternative communication systems can help to ensure that your profit-generating outputs continue to flow. Accounting Accounting is the measurement, processing, and communication of financial information about economic entities such as businesses and corporations. Businesses regulate themselves using two types of accounting: general and analytical. General Accounting The account used to invest the income generated from premiums. Typically, this is an investment portfolio made up of safe, guaranteed investments. Analytical Accounting It is the analysis of direct and indirect costs (full costing and direct costing, ABC), definition of cost and profit centers. Budget A budget is a financial plan for a defined period, often one year. It may also include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. Companies, governments, families and other organizations use it to express strategic plans of activities or events in measurable terms. The three possible time lengths for budgets are: * Short: when it lasts less than a year; * Mid: between one and three years; * Long: longer than three years. Budgets can refer to: * Sales * Production Budgets forecasts can apply to: * Costs * Profitability There are two different types of budget: bottom-up and top-down. Anyway, a mixed version is mostly preferred. Bottom-Up Business areas referents take decision and the management acts. This approach helps policymakers to evaluate whether policy goals are open to more than one interpretation or not. Top-Down Here management takes decision and business areas referents act. This approach involves allowing high-level policymakers set objectives and define implementation strategies. Mixed Version It is a budget type which mixes aspects of the bottom-up and top-down types, described above. Break Even Point In economics and business the Break Even Point is the point at which total cost and total revenue are equal. It is a value that indicates the quantity of product sold necessary to cover the costs previously incurred in order to close the reference period without profits or losses. So, the company's profitability conditions are given by the link between revenues, fixed and variable costs: P = R - C, where P is profits, R is revenues and C is costs. Costs are defined as: C = CF + CV = CF + CVu * q, where CF and CV are respectiviely fixed and variable costs, CVu are variable costs per-unit and q is the quantity of product. To obtain the minimum sustainable quantity, we need to compare costs and revenues and see where they coincide. This quantity is the equilibrium quantity, that is, in fact, the lower bound of the profits domain (which are greater than 0).